updated 10:10 am EDT, Mon September 14, 2009

Casio Hitachi NEC joint cellular venture

Casio, Hitachi and NEC took defensive steps to protect their cellphones today and said they would merge their handset businesses into a single joint venture. The deal leaked earlier will see NEC join an existing Casio and Hitachi venture but largely take it over; NEC will have a 66 percent stake while Casio and Hitachi will have 17.3 percent and 16.7 percent respectively. All three will share their technology, production and other efforts as part of the deal.

The firms expect to finalize the deal by April of next year and will shift their stakes further to give NEC a 70.7 stake, Casio 20 percent and Hitachi just 9.3 percent.

Consolidation of the sort is both a reaction to Japan's own phone market and to the presence of outsiders. The three new partners are significantly smaller than market leaders like Sharp and get a significantly stronger foothold through the merger. However, the entire industry has faced a relatively new threat from Apple's iPhone, which outsold Japanese phones in July despite the country's tendency to prefer its own products.

The shift is believed to come from Apple's emphasis on interface as a selling point. Japanese cellphones are often advanced and have very localized features like 1Seg TV tuning and wireless payments but often have complicated interfaces and usually adopt the same clamshell form factor.